InteractiveBrokers "hyper-hypothecates" $14.5b of Customer Funds?

[Swan Noir]

Good comment, denner. The world is awash in liquidity, levrage is crazy high and the cost to borrow is low enough to prop things up that should have been buried two ... if not ten ... years ago.

It's like putting plastic flowers in a vase and pretending you can smell them. So much of what underpins the current "prosperity" is artificial.

Quote from denner:

Very, very doubtful that they didn't know about that. MFG was at least partially motivated to "gun it" because their interest income had dropped dramatically from 2005-2010.

Ironically, Bernanke has gotten his wish of driving everyone into "risk assets" by keeping rates at zero. Unfortunately, it's a roach motel when they all want out of this toxic Eurozone debt at the same time.

 

[asap]

Quote from Nick29:

IBKR does/did yes. Maybe they weren't aware of MFG's Hyper-Hypothecation.

apparently everyone is doing it.

there is nowhere to hide, either you quit the business or you live by the sword with them.

i don't know if you are aware but nowadays, in europe, the big cash cow companies are moving their deposits to the ECB because they don't trust any of the prime banking institutions anymore... so imagine where that puts the brokerage industry, as far as safety is concerned.

 

[JackR]

Quote from braincell:It would be much better and safer if IB stopped doing this behind the curtain and displayed securities and commodities accounts precisely for each customer somewhere in account management pages.

Braincell:

I see the transfers in my statement virtually every night. Look at the Cash Report, Internal Transfers.

Jack

 

[Nick29]

Just checked both Rosenthal Collins and R J O O'brian. Both have the same provision for re-hypothecation. So it's a cluster fuck.

 

[JackR]

Quote from def:{snip]...]I need to put in a days work now so do not expect any replies for quite some time from me. I agree this is something that needs further clarification so you can be better educated on the subject as well as placate the unfounded fears expressed here. However, this discussion should be for the industry and not single out IB.

If I remember from his posts over the year's, DEF, is in charge of IB's Hong Kong or Far East operations. He defends IB, but he is a straight-shooter. If I'm not mis-interpreting what he said above, he is going to try to get better info to us on what hypothecation and re-hypothecation are. Hopefully, he'll be able to tell us what the various parts of IB do with regard to both, not just the brokerage corporation. As you are aware, lawyers get involved when words are being bandied about - it takes time to get it right.

After reading a lot of stuff in this thread, I better understand the expression - the market is based on fear and greed. Lots of fear being expressed here. I think you guys are going overboard. IB has always been criticized as being overly conservative in virtually everything (except perhaps in the frequency of revising TWS and even that has slowed up remarkably). I'm guessing this is also true of hypothecation and re-hypothecation.

Jack

 

[comintel]

Quote from Nick29:

Just checked both Rosenthal Collins and R J O O'brian. Both have the same provision for re-hypothecation. So it's a cluster fuck.

I cannot find any reference to hypothecate or pledge in the account agreement for Cunningham Commodities/ Cunningham Futures Clearing.

It is a very simple account agreement and does not have anything like that at all.

 

[optionnew]

Quote from comintel:

I cannot find any reference to hypothecate or pledge in the account agreement for Cunningham Commodities/ Cunningham Futures Clearing.

It is a very simple account agreement and does not have anything like that at all.

def posted on 6 forums here yesterday, but today he is very busy, he probably expects the conversation to die. My solution as others point out, if you have less then 500k, keep cash and equity with 1 firm, and futures at the second firm. If you have big account keeps it split with a few brokers. Just forget about the great convenience to have everything at the same place, its a convenience that comes with a high price.

 

[Nick29]

Quote from comintel:

I cannot find any reference to hypothecate or pledge in the account agreement for Cunningham Commodities/ Cunningham Futures Clearing.

It is a very simple account agreement and does not have anything like that at all.

Must be one of few. Just checked Optionsexpress/Openecry, Mbtrading, all have same provision.

 

[comintel]

Earlier I wrote:

I cannot find any reference to hypothecate or pledge in the account agreement for Cunningham Commodities/ Cunningham Futures Clearing.

It is a very simple account agreement and does not have anything like that at all.

The Crossland Agreement looks fine too.........this applies also to DeepDiscountFutures which clears through Crossland...

 

[Nick29]

Quote from comintel:

The Crossland Agreement looks fine too.........this applies also to DeepDiscountFutures which clears through Crossland...

Ok so there's some choice. I guess you just have to take a overall view in terms of what a firm offers security wise.